Friday 13th February: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei down 0.30 %, Shanghai Composite gained 1.80 %, Hang Seng rose 1.20 %, ASX rallied 2.30 %
  • Commodities: Gold at $1228 (+0.70 %), Silver at $16.98 (+1.10 %), WTI Oil at $51.75 (+1.00 %), Brent Oil at $59.85 (+0.90 %)
  • Rates: US 10 year yield at 1.988, UK 10 year yield at 1.661, German 10 year yield at 0.327

News & Data:

  • Japan Foreign Bonds Buying ¥199.5bln, Previous: ¥675.2bln
  • Japan Foreign Investments in Stocks -¥477.1bln, Previous: -¥104.8bln
  • New Zealand FPI 1.3 % m/m, Previous: 0.3 %
  • Reserve Bank of Australia Governor Stevens: Economy continues to grow at moderate pace
  • RBA Stevens: Further adjustment in Aud probably going to occur
  • RBA Stevens: Do not think monetary reached point where it can’t support economy
  • RBA Stevens: Inflation likely to stay pretty low over forecast horizon
  • RBA Stevens: Fall in commodity price to constrain income growth
  • RBA Stevens: Jobless rate incrementally going up, forecast is to go up
  • RBA Stevens: Decline in Aud will be helpful to traded sector
  • RBA Stevens: Aud will probably go down some more
  • RBA Stevens: Cut based on view “could do with more support for economy”
  • RBA Stevens: We should welcome Fed rate hike
  • RBA Stevens: I think productivity growth has started to improve
  • RBA Stevens: Does not seem dangerous kind of deflation is likely in China
  • Asian Stocks Rise Amid Optimism on Progress in Ukraine, Greece (BBG)
  • Brent holds above $59, up more than 3 percent on week (RTRS)
  • Soft data puts dollar on defensive, euro given breather for now (RTRS)
  • Japan core inflation seen cooling, but BOJ to sit tight for now (RTRS)

Markets Update:

The USD extended losses overnight, while AUD was the best performing G10 currency. It all started with the USD/JPY yesterday. The Bank of Japan said that any extra stimulus would be counterproductive and this sent the pair more than a 100 pips lower, to a 118.75. USD/JPY came under further pressure after disappointing US retail sales data in the NY session and together with the more hawkish than expected Bank of England, this led to broad USD weakness. Price action in USD/JPY showed that positioning remains very crowded and the failure to sustain gains above 120.00 suggests the pair might be stuck in consolidation mode for a while ahead. Immediate support now seen at 118.31 and a break lower would pave the way for a test of the lower part of the range at 117.00-20.

The Euro rose on optimism that an agreement between Greece and the EuroGroup will be found soon. Progress in the Ukraine crisis (Minsk deal) also boosted risk appetite and boosted European equity markets. Meanwhile, the Bank of England inflation report was perceived as more hawkish than expected, which led to GBP/USD rising above 1.54. The Aussie Dollar and NZD benefited from the broad Dollar weakness. Many short-term specs were caught short AUD/USD after the weak employment data out of Australia and stops in good size were triggered above 0.7720.

Looking ahead, we have German GDP and Euro Zone GDP & Trade Balance data as the main events in the upcoming EU session. In the NY session, the focus will be on the US consumer sentiment data at 1500 GMT.

Upcoming Events:

  • 07:00 GMT – German GDP (0.3 % q/q, 1.0 % y/y)
  • 07:00 GMT – German WPI (0.4 % m/m)
  • 07:45 GMT – French NFP (-0.1 % q/q)
  • 08:00 GMT – Spanish CPI (-1.7 % m/m, -1.4 % y/y)
  • 08:15 GMT – Swiss PPI (-0.6 % m/m)
  • 09:00 GMT – Italian GDP (-0.1 % q/q, -0.4 % y/y)
  • 10:00 GMT – Euro Zone GDP (0.2 % q/q, 0.8 % y/y)
  • 10:00 GMT – Euro Zone Trade Balance (€20.5bln)
  • 13:30 GMT – Canadian Manufacturing Sales (-0.9 % m/m)
  • 15:00 GMT – US Michigan Consumer Sentiment (98.1)

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